Ohio Casualty Group Affirmed

A.M. Best Co. affirmed the financial strength rating of “A-” (excellent) of the subsidiaries of Ohio Casualty Group based in Cincinnati, Ohio. The affirmation is based on the group’s supportive capitalization, diversified product offerings and geographic spread of risk, as well as its strong brand name recognition and long-standing relationships with its independent agency distribution force.

A new management team has been proactive in implementing various initiatives, including an aggressive expense containment policy, re-underwriting of all product lines and strengthening underwriting guidelines, which has contributed to the group’s restored operating profitability. Furthermore, the parent Ohio Casualty Corporation, closed a convertible note private offering in March 2002. The proceeds from the sale, which amounted to $201 million, were used to retire the Ohio Casualty Corporation’s existing bank debt, which contained several onerous covenants that jeopardized the group’s historically sound balance sheet strength.

Offsetting these positive rating factors is a below average return measures and decline in statutory surplus driven by poor underwriting experience. The group’s poor underwriting experience coupled with dividend payments to Ohio Casualty Corporation has led to a marked deterioration in statutory surplus and rise in underwriting leverage measures over the last five years.

The rating outlook is stable based on the group’s supportive capitalization and measures implemented by management to restore and stabilize overall earnings over the mid-term.